Question

AirQual Test Corporation provides on-site air quality testing services. The company has provided the following cost formulas and actual results for the month of February:

	Fixed Component per Month			Variable Component per Job			Actual Total for February
Revenue				$	278		$	36,170
Technician wages	$	8,600					$	8,450
Mobile lab operating expenses	$	4,700		$	32		$	9,020
Office expenses	$	2,800		$	3		$	3,070
Advertising expenses	$	1,610					$	1,680
Insurance	$	2,880					$	2,880
Miscellaneous expenses	$	950		$	1		$	395

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,700 plus $32 per job, and the actual mobile lab operating expenses for February were $9,020. The company expected to work 140 jobs in February, but actually worked 148 jobs.

Required:

Prepare a flexible budget performance report showing AirQual Test Corporation’s revenue and spending variances and activity variances for February. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Answer 1

		Flexible budget performance report
			Actual	Revenue & spending		Flexible	Activity variance		Static budget
			budget	variance		budget
no of jobs			148			148			140
	Revenue		36,170	4,974	U	41144	2224	F	38920
less:Exoenses
	Technicial wages		8,450	150	U	8,600	0	N	8,600
mobile lab operating expense			9,020	416	F	9436	256	U	9180
office expense			3,070	174	U	3244	24	U	3220
advertising expense			1,680	70	U	1,610	0	N	1,610
insurance			2,880	0	N	2,880	0	N	2,880
miscellaneous expense			395	703	F	1,098	8	U	1,090
total expense			25,495	1,373	F	26,868	288	U	26,580
net operating income			10,675	3,601	F	14,276	1,936	F	12,340